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Banks, traders unite to protect speculation

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“It’s troubling that at a time of $4.06-a-gallon gas, the U.S. Senate treats the issue as if it’s some technical corrections bill,” Senate Minority Leader Mitch McConnell (R-Ky.) told his colleagues on the Senate floor Tuesday. “Let me assure my friends it is not.”
John Shinkle

The financial services industry is targeting a bipartisan bloc of 10 senators seeking compromise on energy legislation, in hopes of killing a bill that would curtail investments in the oil and food futures markets.

The fight pits big banks and traders against gas-guzzling industries, such as airlines and trucking companies, that back various proposals targeting commodities investors.

With gas prices topping $4 per gallon, Senate Democrats are pushing hard to pass a bill to restrict commodities contracts held by so-called market speculators. One key bill cracking down on speculators passed a crucial procedural vote in the Senate on Tuesday.

Soon after, five financial services associations announced the formation of the Coalition to Protect Competitive Markets to fight off efforts to curb investing in the commodities market.

The coalition includes the Financial Services Roundtable, the Managed Funds Association, the Commodity Markets Council and the New York Mercantile Exchange.

Beyond meetings with the senators, the coalition is running ads in Capitol Hill newspapers and has met with officials at the White House and Treasury Department.

Its biggest concern is over a provision allowing the Commodity Futures Trading Commission to determine how large a position can be taken in over-the-counter markets.

The coalition argues that investors should not be blamed for high prices; rather, it says, the prices are a result of global demand outpacing supply as China, India and other energy-hungry countries increasingly buy more oil.

Restricting investment in the commodities market, they say, will result in higher prices for consumers and cut into the retirement savings of older Americans.

Large institutional investors, such as financial services companies, pension funds and university endowments, have poured money into the commodities market to hedge against inflation from the falling dollar.

Investors also place bets on the future price of oil — a strategy that yielded substantial returns as prices skyrocketed.

But the financial services firms weren’t the only ones to benefit from a savvy investing strategy. Southwest Airlines also hedged its oil bets, locking in 70 percent of its fuel needs at $51 a barrel. Today, the airline pays about $2 a gallon for jet fuel.

Without the ability to hedge their bets, the coalition says, companies such as Southwest would be forced to pass higher prices on to consumers — something passengers are now experiencing with airlines that did not lock in prices.

Also, pension funds would be unable to diversify their holdings to minimize the risk of large losses for retirees.

Oh PUH-LEEZE!! What contempt all you have for us. Trading rules were suspended in 1999 by none other than UBS vice-chair then Sen. Phil Gramm. Those rules were formally in place for 60+ years for the very reasons we see today. It not only affects the ppb/oil in futures trading but also other commodities such as grains and metals further negatively affecting the end consumer.

So the 'Presidents working group' is all wet, these aren't "unprescedented restrictions". Market participants (aka: investment banker/brokers) have billions of dollars to affect ppb/oil. Their analysts will come out weekly with their "forecast" for oil prices going higher. I call that market manipulation and insider trading.

The truth is these investment house giants can still trade but with limits and clarity. Those who actually take delivery on the product are now squeezed out of this market and its extreme volatility. One has to suspend ALL LOGIC to believe this is supply/demand market is clear. Goldman-Sachs (Mr. Paulsons former employer) made 4 BILLION on oil future trading alone in the first 6 months of this year. Thats just ONE bank in ONE commodity. Meanwhile us schmucks on the street deal with the dirtiest economic word in the book as a result: STAG-FLATION.

We clearly see how well RISK has been managed by the very same bozo's that nearly crashed our entire economy trading mortgage securities also formally CLOSED to them. Restoration of the Glass-Steagall act would allow Main Street a freaking break to do Main Street business.

I strongly suggest the dollar be strengthened so RISK can be hedged in other market areas that doesn't affect every single person on the planet. Individuals aren't allowed a HEDGE against inflation that doesn't expose them to the roulette wheel of this global market.

Mr. Paulson and Mr. Bernanke, let Americans save money in a BANK and be modestly rewarded so bottom up capitalization can occur without China or Dubai fund. K? thx.

And to you who want to drill: DO IT AND THIS TOO. This is not a partisan issue, STOP making it that way.

THIS ISN'T AN EITHER OR SITUATION. It is DO BOTH situation and include alternative energy initiatives as well.

DO IT ALL. DO IT NOW.

You only have 25 days in your legislative session (amazing while the rest of us have 5 months yet to work)....do it and stop playing partisan games, endless and repetitive debates, power grabs and face time. Yup I a stupid dork watch C-span. I'm taking names.

No ,no, yes, yes, dig, dig, drill, drill, explore, explore, bail out, bail out, are you frantic yet. Welcome back to yesterday. No time for clear thinking when we are being manipulated by those who want it all. We are a country steeped in Usury (look it up) , it was unlawful once upon a time. A usur nation lost in its own self indulgence will fall, as in the past. Look forward to some very tough times, a collapse of the economy and a new beginning. We will all have plenty of plastic cards to remember the past, in land fills.